National Association of Home Builders Discusses Economics and Housing Policy

The Employment Situation for August – Employment at the Fed

A mixed jobs report starts the drum-roll for the September meeting of the Federal Open Market Committee (FOMC), as analysts speculate over whether the committee will announce the start of tapering the Fed’s bond purchase program (QE3) or hold off until the December meeting.

The Bureau of Labor Statistics (BLS) released the Employment Situation report for August. From the establishment survey, total nonfarm payrolls expanded by a lower than expected 169,000, with the private sector adding 152,000 and government adding 17,000. The previous two months were revised downward by a total of 74,000. From the household survey, the unemployment rate dropped to 7.3%, but unfortunately the decline was based largely on a decline in the labor force of 312,000.

The Fed has tied the tapering of its bond purchasing program to substantial and sustained improvement in the labor market. Today’s report can be read either way: the economy keeps adding jobs and the unemployment rate continues to decline, or, recent job growth is weaker than initially estimated and the decline in the unemployment rate is based on a declining labor force participation rate.

The Goldilocks nature of today’s report is unlikely to change any opinions about the appropriate timing of the Fed’s tapering, whether on the FOMC or not. September or December? We’ll just have to wait and see.